Vessel Valuation & Asset Risk
Scrap Value and Lightweight Tonnage
Summary
Scrap value is a potential recycling cash flow, commonly assessed using lightweight tonnage rather than deadweight or displacement.
Why this matters in ship finance
The scrap floor can matter for older vessels and recoveries, but net proceeds depend on recyclable material, yard price, delivery and regulation.
The concept
Lightweight (LDT/LWT) approximates the ship’s mass excluding cargo, bunkers and stores. Deadweight (DWT) measures carrying capacity and displacement is the ship’s total weight in a specified loading condition. These quantities must never be interchanged.
How it is used in practice
Use verified lightweight particulars, a market-specific price per lightweight tonne, demolition voyage and bunkering costs, commissions, environmental compliance and currency adjustments.
Analytical formulation
Illustrative worked example
Illustration: 8,000 verified lightweight tonnes at an illustrative USD 400 per lightweight tonne gives USD 3.2m gross, before delivery, brokerage and compliant recycling costs.
Practical issues
A recycling quote is not a risk-free floor; regional price differences, inventories of hazardous materials and rules under the Hong Kong Convention or EU regime can affect achievable net proceeds.
How ShipFinance.ai uses this concept
ShipFinance.ai can structure this topic around a transparent, auditable record of valuation evidence, assumptions, uncertainty bands and loan-to-value impacts. A useful decision output is a base case beside a clearly labelled alternative case, with input sources, effective dates and the assumptions responsible for any change in financing capacity.
Key takeaways
- Scrap value is a potential recycling cash flow, commonly assessed using lightweight tonnage rather than deadweight or displacement.
- Use verified lightweight particulars, a market-specific price per lightweight tonne, demolition voyage and bunkering costs, commissions, environmental compliance and currency adjustments.
- A recycling quote is not a risk-free floor; regional price differences, inventories of hazardous materials and rules under the Hong Kong Convention or EU regime can affect achievable net proceeds.